Seoul High Court 2009Nu25080 (Law No. 15, 2010)

Cho High Court Decision 2006west0846 (Law No. 30, 2006)

The portion of input tax deduction and refund of gold bullion exporters should be re-determined as to whether the violation of the good faith principle is against the input tax deduction and refund.

First, after examining the details of the disposition imposing the value-added tax in this case, regarding the deduction and refund of the input tax amount for the export transaction subject to zero tax rate or the sales transaction through a purchase confirmation, etc., it should have sufficiently deliberated on whether there was any illegal transaction or any gross negligence, and should have determined whether the assertion for deduction and refund of the input tax amount is against the good faith principle.

Article 15 of the Framework Act on National Taxes

2010du8515 Value-Added Tax, etc. Revocation of Disposition

ThisAAA

Head of the tax office;

Seoul High Court Decision 2009Nu25080 Decided April 15, 2010

July 25, 2013

The part of the judgment of the court below regarding the imposition of value-added tax and the part concerning additional dues and increased additional dues shall be reversed among the imposition of value-added tax.

Among the disposition imposing value-added tax on the first instance court, the part concerning penalty tax in good faith, additional dues and increased additional dues thereon, and the part concerning additional dues and increased additional dues which are not evidence among the disposition imposing corporate tax, shall be revoked, and the part concerning additional dues and increased additional dues shall be dismissed.

Among the instant cases, the part on the imposition of value-added tax, excluding additional dues and aggravated additional dues, shall be remanded to the Seoul High Court. The remaining grounds of appeal shall be dismissed.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. Ex officio determination on the portion of additional tax for failure to enter the tax invoice;

According to the records, on July 15, 201, which was after the filing of the instant final appeal, the Defendant: (a) revoked ex officio part of the disposition imposing the value-added tax of this case on July 15, 201; (b) additional dues and increased additional dues; and (c) additional dues and increased additional dues; and (b) thus, the Plaintiff’s lawsuit on this part is seeking revocation of the disposition that is not extinguished, and thus, became unlawful as there was no benefit in the lawsuit.

2. As to the fact that the instant tax invoice is a false tax invoice

According to the reasoning of the judgment below, the court below determined that each tax invoice (hereinafter referred to as the "tax invoice of this case") issued when the plaintiff purchases gold bullion amounting to KRW 000 (hereinafter referred to as "gold bullion of this case") equivalent to the total value of supply from three business operators, such as BB precious Co., Ltd. (hereinafter referred to as "BB precious metal") which are substantially operated by the plaintiff, after compiling the adopted evidence, did not correspond to the tax invoice different from the fact, and this point was not the same even if the plaintiff was convicted of having been convicted of having conspired to commit tax evasion by the malicious business operator.

In light of the relevant legal principles and records, the fact-finding and judgment of the court below are just, and there is no error of law by misapprehending the legal principles as to "tax invoice different from the facts" alleged in

3. On the ground that unfair input tax deduction and refund claim violate the principle of good faith

(1) Article 15 of the former Framework Act on National Taxes (amended by Act No. 911, Jan. 1, 2010; hereinafter “the Framework Act on National Taxes”) declares that “where a taxpayer performs his/her duties, he/she shall faithfully and faithfully comply with the principle of good faith.” This shall also apply to the case where a tax official performs his/her duties.” Thus, the principle of good faith is deemed to be a basic guiding ideology in the field of tax law. As such, the legal principle of 2015 of the Framework Act on National Taxes applies not only to the case where a malicious entrepreneur, who is an exporter, knew of, or was negligent in, the circumstance that the Plaintiff’s deduction and refund of the input tax amount would cause the decline of other tax revenues, but also to seek the deduction and refund of the input tax amount, even though he/she knew of, or did not know, of the fact that the input tax amount would have been evaded through the malicious entrepreneur’s abuse of the system for deduction and refund of the input tax amount, but also to the Plaintiff’s purchase tax amount.

However, in the case of a domestic taxable entrepreneur who is not subject to zero tax rate, the aforementioned principle of trust and good faith is not only an essential factor in the transaction, but also an intentional role between an entrepreneur and malicious entrepreneur to whom the zero tax rate applies, even if he/she recognizes the deduction and refund of the input tax amount, since the difference between the output tax amount and the input tax amount are paid to the State, it does not cause any direct loss to the National Treasury. Furthermore, it is sufficient to restrict the deduction and refund of the input tax amount by an entrepreneur to whom the zero tax rate applies, and further, denying the deduction and refund of the input tax amount by an entrepreneur at the middle stage of the transaction would result in an unfair gain by the State (see, e.g., Supreme Court Decisions 2009Du16367, Feb. 10, 201; 2009Du19304, Jul. 24, 2011).

(2) In light of such legal principles, if a malicious entrepreneur exists in a series of transactions prior to the occurrence of a malicious entrepreneur who makes an illegal transaction for the purpose of evading the output tax amount, and thereby seeks the deduction and refund of the input tax amount pursuant to the tax invoice of this case even though he knew or was unaware of the fact that the deduction and refund of the input tax amount for BB precious metal would result in a decrease in other tax revenues, the exporter’s and the wholesaler’s illegal transaction of BB precious metal would abuse the input tax deduction and refund system to obtain part of the input tax amount evaded by a malicious entrepreneur as well as damage the basis of the value-added tax system and the overall tax justice under Article 15 of the Framework Act on National Taxes.

(3) According to the reasoning of the lower judgment and the record, not only domestic taxation transactions but also export or purchase certificates to which zero tax rate applies are included in the instant gold bullion transaction.

Therefore, the lower court should first examine the details of the disposition imposing the value-added tax in this case, thereby distinguishing between the deduction and refund of input tax amounts on the export transaction subject to zero tax rate or sales transaction through a purchase confirmation, etc. and the deduction and refund of input tax amounts on the domestic tax transaction. In the former case, the lower court should have sufficiently examined whether the BB precious metal knew or was unaware of such illegal transaction as seen in the above legal doctrine, and determined whether the BB precious metal’s assertion on deduction and refund of input tax amounts is contrary to the principle of good faith.

Nevertheless, the lower court, without such deliberation and determination, deemed that all claims for deduction and refund of the input tax amount of BB precious metal should be permitted solely on the ground that the instant tax invoice does not constitute a false tax invoice, and determined that the instant disposition imposing the value-added tax, which the Plaintiff designated as the secondary taxpayer of BB precious metal, was unlawful. In so doing, the lower court erred by misapprehending the legal doctrine on the principle of trust and good faith, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

4. As to the portion of the disposition imposing corporate tax except for additional dues, additional dues and aggravated additional dues for the supporting documents

This part of the petition of appeal is also subject to appeal, but the petition of appeal or appellate brief does not contain legitimate grounds of appeal.

5. Conclusion

Of the judgment of the court below, the part concerning the imposition of value-added tax, additional dues, and increased additional dues shall be reversed. Since the part concerning the defendant's ex officio revocation in the judgment of the court of first instance is sufficient to directly judge the Supreme Court, the part concerning the defendant's ex officio revocation shall be revoked. The defendant's ex officio revocation in the judgment of the court of first instance shall be dismissed, and the case shall be remanded to the court below for further proceedings consistent with this Opinion. The remaining grounds for appeal shall be dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.